How the Internet Happened? - I Guarantee You a Fun Read!

If reading a book can be compared to a bus ride, then this book is a speedy bus ride on the internet startups freeway stopping at some important upstarts and glancing over the rest of the failed/successful startups both before and after the dot-com bubble.

Our ride starts at Mosaic browser being developed as a research project and ends at App Store. We briefly stop at Mosaic, Netscape, AOL, Amazon, eBay, Etoys, TheGlobe, Napster, Google, Youtube, Netflix, Overture (goto.com), Yahoo, Wikipedia, Blogger, Friendster, AIM, MySpace, Facebook, Apple iTunes, Apple app store and also witness the famous browser war, dot-com burst, Google and Facebook’s growth in between the stops.

Microsoft woke up late on the day when the Internet came to the town and then tried to leverage its OS to catch up which ended in the famous browser war and as a result Bill Gates had to undergo a deposition before DOJ. On the other hand, AOL hosted, an early party for the Internet and never wanted the Internet to leave its walled garden by trying to leverage its platform.

There were sites of all sorts that covered different niches before the dot-com burst. Also, VCs were very eager to invest in these dot-com startups irrespective of whether these sites make profits. They were mainly interested in the money fetched during the IPOs of such startups. Ultimately, when the bubble finally burst, NASDAQ lost nearly 80% of its value. A fine example is Etoys, which was valued at $10 billion, can’t even salvage $80 million for the warehouse system it had built. It is estimated that $1.7 trillion was lost.

At the end of the dot-com bubble, few internet based companies survived, such as Amazon, Netflix, eBay and Yahoo!. Just before the dot-com bubble burst and after it, we see a few new companies such as PayPal, Napster, Google, YouTube and MySpace. We see how Google started as a small project inside Stanford and becomes a behemoth because of few innovations and luck plus timing. Google founders realized that citation plays a major role in the academic papers and applied a similar concept for ranking web pages. You can read more here. Google’s significant innovation was this page rank technique that helped it to become a market leader in online search.

Yahoo! had made a deal where they got a 10% stake in Google when it was a small search engine and was offering search as a service to other partners. So the search in Yahoo! portal was powered by Google for some period of time. Google hit 100 million searches in 2001 with more than 1000 queries per second. Google had been growing so fast that it was unable to meet its financial needs just from the funding and the money it got from various search deals. It was looking for other avenues and running ads on the search engine result pages was one of the three ideas.

We look at an obscure company called goto.com which was founded by Bill Gross and was later renamed to ‘Overture’. GoTo was a search engine just powered by ads. Advertisers pay by bidding for a search term and pay per click were two key innovations of it. GoTo partnered with other search engines and displayed ads either on the top or bottom of the search results page. In 2000 Google launched ‘Ad Words’ and in February 2002 it copied pay per click model and ad auction price model and added a small innovation to it by including a ranking factor for ads called as ‘Quality Score’. Overture model had an issue in ad placements where the highest bidder takes the top spot. But with Google’s quality score, only ads of higher quality ranked much higher regardless of the money an advertiser spent. Yahoo! later acquired GoTo in 2003 and later Google had to settle the patent related lawsuits with Yahoo!.

Google had a 60% operating margin when it IPOed. This was shocking to every other online company and to Wall Street. Google had a bigger market share in online advertising than any other online companies and continues to do so. Napster a file sharing website which facilitated sharing mp3 files among users had so many copyright lawsuits from the record labels and was shut down. Youtube, which was a video sharing site had the same problem later. Google, which acquired Youtube had a different stance on copyrights than Napster and was willing to 100% comply with the copyright laws.

Next stop is Social Networking and we are introduced to a site called ‘Six Degrees’ which was named after the six degrees of separation concept and you can read it here. Then came Friendster which inspired a lot of other niche networking *ster sites like Dogster, Catster and Elfster. MySpace, also a friendster clone was created by eUniverse employees in 2003. In 2004, Facebook was created by Mark and were slowly rolling out to major universities and college campuses. In 2005, ‘MySpace’ rejected Mark’s offer of $75 million deal to sell Facebook. Myspace grew in users and was later acquired by Rupert Murdoch for $580 million. Later Myspace was valued at $12 billion at its peak around 2007-2008 and then was sold for $32 million by Murdoch’s News Corp.

Facebook managed to generate critical mass and was attracting users from other social networking sites as it was opened to public. Sean Parker (of Napster fame) helped Mark secure angel funding from Peter Theil and Reid Hoffman during the early days.

Towards the end of the book, we look at mobile computing, especially PDAs, pagers, BlackBerry and iPhones. BlackBerry was the first device where users were just hooked to the device always and everywhere even during a conversation. This is the start of a different era where people are going to be always online and reachable.

There were as many as 100 million cell phones as early as 1995. Ericsson and Nokia were the biggest players on the cell phone market and Ericsson unveiled the first flip smart phone. Phones that were sold in Japan even had cameras as early as 2000. iPod iTunes growth attracted so many eyes and Apple began to wonder what would eat into the iPod market? People always wanted Apple to do so many other products such as cameras etc., after the iPod. In 2004, a VC literally begged Jobs to make a phone during an interview. Jobs thought it was a lot of work and networks had an upper hand in dictating what could cell phone manufacturers do and not to do. Apple also partnered with Motorola, which also made a phone that was dubbed as ‘Phone of the Future’, but it didn’t hold up well to the expectation.

Two of the Apple employees also persuaded Jobs to make a phone and also AT&T gave Apple the full freedom to make a phone as it wished. There were two tracks and one of them was fitting a phone radio into an iPod and another one was to shrink a multi-point touch device like a tablet to the size of a phone. The multi-point touch device was already being explored by a team of mobile computing engineers with the help of a company called ‘FingerWorks’. Finger scroll, double tap zoom, chiclet icons were all developed in this new device. On the day of the launch, an engineer just drove all of the iphones used for demo to San Francisco Moscone center. AT&T came up with a small portable phone tower.

An automobile design evolves over 40 years and iPhone did it in the first try and that’s why every smart phone resembles the first iPhone. Jobs was first hesitant about allowing third party apps on the iPhone and the idea of an app store. But later he didn’t care that much and on July 2008, the App Store was launched. Imagine Uber, Facebook and any app you can imagine is the result of the smart phone revolution started by the iPhone.

My Thoughts

What comes next? This is a fun book and compresses nearly 30 years of the Internet’s history. And every big company had its timing right, grew too fast, was afraid of other big companies (Google fears Microsoft. etc.,) and lots of luck. It seems that every popular site offers a form of instant gratification and infinite selection. I wish for something and it’s immediately delivered, I decide to watch something and there are a million videos I can choose from. As I read in another book called ‘Flow’, we’re increasingly becoming passive consumers of these sites and are not actively contributing or pursuing anything creatively. What were we doing before a mobile phone and these sites? Do any of us remember it anymore?